📊 2025 Federal Budget – What It Means for Business Owners and Individuals

On November 4, 2025, Finance Minister François-Philippe Champagne released the 2025 Federal Budget. While much of it focuses on clean-tech and competitiveness, several tax changes directly affect business owners, incorporated professionals, and individuals.

Here’s a summary of what’s most relevant to you as individuals and business owners.

🏢 Business Measures

Immediate Expensing for Manufacturing & Processing Buildings

Businesses can now claim a 100% first-year deduction for new or improved manufacturing and processing buildings acquired after November 4, 2025, and first used before 2023. To qualify, at least 90% of the building’s use must be for manufacturing or processing.

Impact: Immediate expensing can significantly improve cash flow and accelerate investment in facilities.

SR&ED Enhancements

The Scientific Research & Experimental Development (SR&ED) expenditure limit eligible for the enhanced 35% refundable credit rises to $6 million for taxation years beginning after December 15, 2024. This builds on prior measures restoring eligibility for capital expenditures and expanding refundability, great news for startups and tech innovators reinvesting in R&D.

Restrictions on Tax Deferral through Tiered Corporations

New rules will limit tax deferral strategies that use multiple corporations with different fiscal year-ends to delay paying tax on investment income. Dividend refunds will now be suspended when dividends move between affiliated corporations with mismatched year-ends and will only be released when dividends are paid to individuals or non-affiliated entities.

Effective: Tax years beginning on or after November 4, 2025.

Cancellation of the Canadian Entrepreneurs’ Incentive

The previously announced reduced capital-gains inclusion rate for qualifying business founders has been withdrawn.

Impact: The standard 50% capital-gains inclusion rate remains; founders planning exits should review their succession and share-sale strategies.

👩‍💼 Personal Measures

Lower Federal Tax Rate + Top-Up Credit

The lowest federal personal income tax rate drops from 15% to 14.5% (2025) and 14% (2026).To prevent taxpayers from losing the value of their non-refundable credits, a new Top-Up Tax Credit (2025-2030) maintains the current 15% credit value.

Outcome: Slight tax relief overall, with no claw-back effect from the rate cut.

Personal Support Workers Credit

A refundable credit for personal support workers will be introduced for 2026 through 2030. The credit equals 5 percent of eligible earnings, up to $1,100 per year, and applies to those employed by hospitals, care homes, and similar regulated healthcare providers in provinces without a federal wage-increase agreement.

Automatic Filing for Low-Income Canadians

Beginning in 2026, the CRA will have authority to auto-file tax returns for eligible low-income individuals to ensure access to benefits and credits.

⚙️ Other Measures

Elimination of the Underused Housing Tax (UHT)

The Underused Housing Tax will be eliminated starting in the 2025 calendar year. Property owners will no longer need to file or pay UHT for 2025 and later, although filings for 2022 to 2024 remain required.

21-Year Trust Rule Expanded

The long-standing 21-year deemed-disposition rule for trusts is being broadened to include indirect transfers between trusts, effective for transfers after November 3, 2025. Trustees should review trust structures ahead of upcoming 21-year anniversaries to avoid unexpected capital gains.

Luxury Tax Removed on Aircraft and Vessels

The luxury tax on aircraft and vessels will also be repealed effective November 5, 2025. The vehicle luxury tax remains.

Previously Announced Measures Confirmed

The budget also reconfirms several prior initiatives, including:

• The $1.25 million Lifetime Capital Gains Exemption

• Capital gains rollover for small-business investments

• Deferred bare-trust reporting to 2026

• Alternative Minimum Tax (AMT) updates and EIFEL rules

  
  

💡 In Summary

Budget 2025 signals a focus on investment, productivity, and simplification.For business owners, the key opportunities are in accelerated write-offs and enhanced SR&ED credits; for individuals, rate relief and the elimination of the UHT provide modest but welcome improvements.

If you’d like help understanding how these changes affect your corporation, investments, or year-end planning, we can help you map out a strategy that fits.

📩 Contact ModernWave Tax at info@modernwavetax.com or book a consultation through our website.